Soft toy

IKEA

IKEA is a privately-held, international home products retailer that sells flat packfurniture, accessories, bathrooms and kitchens at retail stores around the world. The company, which pioneered flat-pack design furniture at affordable prices, is now the world's largest furniture manufacturer.

IKEA was founded in 1943 by Ingvar Kamprad in Sweden and it is owned by a Dutch-registered foundation controlled by the Kamprad family. IKEA is an acronym comprising the initials of the founder's name (Ingvar Kamprad), the farm where he grew up (Elmtaryd), and his home county (Agunnaryd, in Småland, South Sweden).

INGKA Holding B.V. is the parent company for all IKEA Group companies, including the industrial group Swedwood, which manufactures IKEA furniture, the sales companies that run IKEA stores, as well as purchasing and supply functions, and IKEA of Sweden, which is responsible for the design and development of products in the IKEA range. INGKA Holding BV is wholly owned by Stichting INGKA Foundation, which is a non-profitfoundation registered in Leiden in the Netherlands.

Inter IKEA Systems B.V. in Delft, also in the Netherlands, owns the IKEA concept and trademark, and there is a franchising agreement with every IKEA store in the world. The IKEA Group is the biggest franchisee of Inter IKEA Systems B.V. Inter IKEA Systems B.V. is not owned by INGKA Holding B.V., but by Inter IKEA Holding S.A. registered in Luxemburg, which in turn is part of Inter IKEA Holding registered in the Netherlands Antilles. The ownership of the holding companies has not been disclosed.

General overview

The company distributes its products through its retail outlets. The chain has 278 stores in 36 countries, most of them in Europe, the United States, Canada, Asia and Australia. 2006 saw the opening of 16 new stores. A total of at least 30 openings or relocations are planned for 2008. IKEA is one of the few store chains to have locations both in Israel and in other Middle Eastern nations.

IKEA is generally but in many English-speaking regions, it is , rhyming with the word "idea". As such, IKEA brought action in the Supreme Court of British Columbia successfully preventing a competitor in Victoria from using the name "Idea". It is generally in China, Singapore and Taiwan. Its Chinese name is "yíjiā" (宜家), which literally means "fit for home" in written Chinese and sounds like the phrase "right now" in Cantonese pronunciation.

The IKEA Website contains about 12,000 products and is the closest representation of the entire IKEA range. In 2005 IKEA reported over 275 million visitors to their websites.

History

IKEA was founded in Älmhult, Sweden, in 1943 by Ingvar Kamprad, when he was 17. The acronym IKEA is incidentally similar to the Greek word οικία [oikia] (home) and to the Finnish word oikea (true, correct, right), but was originally an abbreviation for "Ingvar Kamprad Elmtaryd Agunnaryd" which is the initial letters of his first and last name, the farm where he grew up and the town he lived in.

Originally, IKEA sold pens, wallets, picture frames, table runners, watches, jewelry and nylonstockings or practically anything Kamprad found a need for that he could fill with a product at a reduced price. Furniture was first added to the IKEA product range in 1948 and, in 1955, IKEA began to design its own furniture. The company motto is: "To create a better everyday life for the many people."

At first, Kamprad sold his goods out of his home and by mail order, but eventually a store was opened in the nearby town of Älmhult. It was also the location for the first IKEA "warehouse" store which came to serve as a model for IKEA establishments elsewhere. On March 23, 1963, the first store outside Sweden was opened in Asker, a Norwegian municipality outside Oslo.

IKEA stores

The first IKEA store was opened in Sweden in 1958. The first stores outside Sweden were opened in Norway (1963) and Denmark (1969). The 1970s saw the spread of stores to other parts of Europe, with the first store outside Scandinavia opening in Switzerland (1973), followed by Germany (1974). During the same decade, stores were opened in other parts of the world, including Japan (1974), Australia and Hong Kong (1975), Canada (1976) and Singapore (1978). Germany, with 43 stores, is IKEA's biggest market, followed by the United States, with 34. IKEA now has 278 stores in over 35 countries. However, the company has thus far not shown much of a presence in the developing countries.

Store format

Newer IKEA stores are usually very large blue buildings with few windows and yellow accents (the company's colors are also the national colors of Sweden). They are often designed around a "one-way" layout which leads customers along "the long natural way". This layout is designed to encourage the customer to see the store in its entirety (as opposed to a traditional retail store, which allows a consumer to go right to the section that the goods and services needed are displayed) although there are often shortcuts to other parts of the showroom. The sequence first involves going through furniture showrooms making note of selected items. Then the customer collects a trolley and goes into house wares (market-hall). Then the customer visits the warehouse (Self Serve) where they collect previously noted showroom products in flat pack form. Sometimes they may be directed to collect products from an external warehouse on the same site or at a site nearby. Finally they take their products to the cashier's station to make payment.

Newer IKEA stores, like the one in Koblenz, Germany, make more use of glass, both for aesthetic and functional reasons. Skylights are also now common in the Self-serve warehouses. More natural light reduces energy costs, improves worker morale and gives a better impression of the product.

Whilst the original design involved the warehouse on the lower level and the showroom and marketplace on the upper, today most stores globally have the Showroom upstairs with the marketplace and warehouse downstairs. Additionally, some stores are single level. Some stores maintain separate warehouses to allow more stock to be kept on-site at any given time, although this occasionally results in challenges in finding the items, as well as a perception of having to queue in line twice. Single-level stores are found predominantly in areas where the cost of land would be less than the cost of building a 2-level store -- examples include the store in Saarlouis, Germany and Haparanda, Sweden.

Most IKEA stores offer an "as-is" area at the end of the warehouse just prior to the cashiers. Returned, damaged and formerly showcased products which are not in new condition or taken out of the IKEA product range are displayed here, and sold with a significant discount, but also with a "no-returns" policy. Most IKEA stores communicate the IKEA policy on environmental issues in the "as-is". In the United Kingdom, Canada and Australia, this is referred to as "Bargain Corner".

In Hong Kong, where shop space is limited and costly, IKEA has opened three outlets across the city, which are actually part of shopping malls. They are relatively tiny compared to common "large blue box" store design, but are huge by Hong Kong standard. Most of the outlets still have a "one-way" layout. An exception is the newest outlet in Telford Plaza, where the three independent floors can be accessed freely from each. Following IKEA tradition, though, the only cashier is located on the lowest floor.

The vast majority of IKEA stores are located outside of city centres, primarily because of land cost and traffic access. Several smaller store formats have been unsuccessfully tested in the past (the "midi" concept in the early 90s, which was tested in Ottawa and Heerlen with 9,300 m2, or a "boutique" shop in Manhattan). A new format for a full-size, city centre store was introduced with the opening of the Coventry (UK) store in December 2007. This is in response to UK government restrictions blocking retail establishment outside city centres, and the format is expected to be used for future IKEA stores in the UK. The Coventry store has 7 levels and therefore has a flow different from other IKEA stores.

Restaurants and food markets

Many stores include restaurants serving typical Swedish food such as potatoes with Swedish meatballs, cream sauce and lingonberry jam, hot dogs and drinks for around 5 kr ($2.50 US), a few varieties of the local cuisine, and beverages such as lingonberry juice. The restaurant area is usually the one place in the store where there are large windows.

In many locations the IKEA restaurants open daily before the rest of the store and serve a cheap breakfast. In Canada, this breakfast costs $1 and has eggs, sausage, fried potatoes and a croissant. In the Netherlands it costs €1 and consists of a croissant, a small bread roll, butter or margarine, jam, a slice of cheese, a boiled egg, and coffee or tea.

Refills of coffee, tea, and softdrinks are free of charge, even in countries where this is uncommon in other restaurants.

Many stores also have a mini-shop selling Swedish-made, Swedish-style groceries, such as Swedish meatballs, packages of gravy, and various Scandinavian cookies and crackers, as well as salmon and salmon roe. IKEA also sells lingonberry jam in a wide array of sizes, including buckets.

Småland

Many stores have a play area for children aged 3 to 10 years old named Småland. The service is offered completely free of charge. The area mostly features things such as slides, seesaws, cartoons, a ball pit, etc. Småland is also the province in Sweden where Ingvar Kamprad was born (translated from swedish to english: Små = little (plural) and land = land, "littleland").

Products

Furniture

IKEA furniture is well known for its modern, utilitarian design. Much of IKEA's furniture is designed to be assembled by the consumer rather than being sold pre-assembled. IKEA claims this permits them to reduce costs and use of packaging by not shipping air; the volume of a bookcase, for example, is considerably less if it is shipped unassembled rather than assembled. This is also a practical point for many of the chain's European customers, where public transport is commonly used; the flat-pack distribution methods allow for easier transport via public transport from the store to a customer's home for assembly.

IKEA contends that it has been a pioneering force in sustainable approaches to mass consumer culture. Kamprad refers to the concept as "democratic design," meaning that the company applies an integrated approach to manufacturing and design (see also environmental design). In response to the explosion of human population and material expectations in the 20th and 21st century, the company implements economies of scale, capturing material streams and creating manufacturing processes that hold costs and resource use down, such as the extensive use of particle board. The intended result is flexible, adaptable home furnishings, scalable both to smaller homes and dwellings as well as large houses.

Houses, flats

IKEA has also expanded their product base to include flat-pack houses, in an effort to cut prices involved in a first-time buyer's home. The product, named BoKlok was launched in Sweden in 1996 in a joint venture with Skanska. Now working in the Nordic countries and in UK, sites confirmed in England include London, Manchester, Leeds, Gateshead and Liverpool.

Family Mobile

Family Mobile is available to all UK IKEA Family members and offers UK calls for 9p per min and UK text messages for 6p each, with a minimum initial top up of £10. According to IKEA this made the network the cheapest pay as you go operator in the UK at time of launch – "at least 25 per cent cheaper than any other comparable prepay offer". The service targets families and allows customers a number of SIM cards per account, so credit is shared among the different lines. Customers can order a free SIM at the Family Mobile website familymobile.co.uk

As part of the launch for the service all 9500 UK employees were given a free mobile phone along with a free Family Mobile SIM card with £5 credit pre-loaded on August 5.

Manufacturing

Although IKEA household products and furniture are designed in Sweden, they are largely manufactured in developing countries to keep down costs. With suppliers in 50 countries, roughly 2/3 of purchasing is from Europe with about 1/3 from Asia. A small amount of products are produced in North America. Comparatively little production actually takes place in Sweden, though it still remains the fourth-largest supplier country (behind China, Poland and Italy). China accounts for about 2.5 times as much supply as Sweden. For most of its products, the final assembly is performed by the end-user (consumer).

Product names

IKEA products are identified by single word names. Most of the names are Swedish in origin. Although there are some notable exceptions, most product names are based on a special naming system developed by IKEA.

For example, DUKTIG (meaning: good, well-behaved) is a line of children's toys, OSLO is a name of a bed, BILLY (a Swedish masculine name) is a popular shelf, DINERA (meaning: (to) dine) for tableware, KASSETT (meaning: cassette) for media storage. One range of office furniture is named EFFEKTIV (meaning: efficient), SKÄRPT (meaning: sharp or clever) is a line of kitchen knives.

A notable exception is the IVAR shelving system, which dates back to the early 1970s. This item is named after the item's designer.

Because IKEA is a world-wide company working in several countries with several different languages, sometimes the Nordic naming leads to problems where the word means something completely different to the product. While exotic-sounding names draw an attention, e.g., in anglophone countries, a number of them call for a snicker. Notable examples are "Jerker" desk, "Fartfull" workbench, or "Lessebo" sofa. The products are withdrawn, probably after someone pointed at blunders, but not before generating some news. Similar blunders happen with other companies as well.

Company founder Ingvar Kamprad, who is dyslexic, found that naming the furniture with proper names and words, rather than a product code, made the names easier to remember .

Catalogue

IKEA publishes an annual catalogue. First published in Swedish in 1951, the catalogue is now published in 55 editions, in 27 languages for 36 countries, and is considered to be the main marketing tool of the retail giant, consuming 70% of the company's annual marketing budget.

The catalogue is distributed both in stores and by mail. Most of the catalogue is produced by IKEA Communications AB in IKEA's hometown of Älmhult, Sweden where IKEA operates the largest photo studio in northern Europe at 8,000 square metres in size. The catalogue itself is printed on chlorine-free paper of 10-15% post-consumer waste.

According to Canadian broadcaster, CTV, "IKEA's publications have developed an almost cult-like following online. Readers have found all kinds of strange tidbits, including mysterious cat pictures, apparent Mickey Mouse references and weird books wedged into the many shelves that clutter the catalogues."

IKEA Family

In common with some other retailers, IKEA has launched a loyalty card in its stores in Sweden, Denmark, Finland, the UK, the Netherlands, Belgium, Germany, Austria, Russia, China, Japan, Switzerland, Slovakia, Poland, Italy and France called "IKEA Family". The distinctive orange card is free of charge and can be used to obtain discounts on a special range of products found in each IKEA store. In particular, it gives 25% off the price of commissioned ranges of IKEA products on presentation of the card. The card also gives discounts on food purchased in the restaurant and the Swedish Food Market. In the Netherlands, Denmark, Belgium, Germany, Austria, Russia, Japan, UK, Switzerland, Slovakia and Poland it also entitles the holder to free coffee in the restaurant.

In conjunction with the card, IKEA also publishes and sells a printed quarterly magazine titled IKEA Family Live which supplements the card and catalogue. The magazine is already printed in thirteen languages and an English edition for the United Kingdom was launched in February 2007. It is expected to have a subscription of over 500,000.

Corporate structure

The IKEA corporate structure is divided into two main parts: operations and franchising. Most of IKEA's operations, including the management of the majority of its stores, the design and manufacture of its furniture, and purchasing and supply functions are overseen by Ingka Holding, a private, for-profit Dutch company. Of the IKEA stores in 36 countries, 235 are run by the INGKA Holding. The remaining 30 stores are run by franchisees outside of the INGKA Holding.

INGKA Holding is not an independent company, but is wholly owned by the Stichting Ingka Foundation, which Kamprad established in 1982 in the Netherlands as a tax-exempt, not-for-profit foundation. The Ingka Foundation is controlled by a five-member executive committee that is chaired by Kamprad and includes his wife and attorney.

While most IKEA stores operate under the direct purview of Ingka Holding and the Ingka Foundation, the IKEA trademark and concept is owned by an entirely separate Dutch company, Inter IKEA Systems. Every IKEA store, including those run by Ingka Holding, pays a franchise fee of 3% of the revenue to Inter IKEA Systems. The ownership of Inter IKEA Systems is exceedingly complicated and, ultimately, uncertain. Inter IKEA Systems is owned by Inter IKEA Holding, a company registered in Luxembourg. Inter IKEA Holding, in turn, belongs to an identically named company in the Netherlands Antilles that is run by a trust company based in Curaçao. The owners of this trust company are unknown (IKEA refuses to identify them) but are assumed to be members of the Kamprad family.

Non-taxable profit

In 2004, the last year that the INGKA Holding group filed accounts, the company reported profits of €1.4 billion on sales of €12.8 billion, a margin of nearly 11 percent. Because INGKA Holding is owned by the nonprofit INGKA Foundation, none of this profit is taxed. The foundation's nonprofit status also means that the Kamprad family cannot reap these profits directly, but the Kamprads do collect a portion of IKEA sales profits through the franchising relationship between INGKA Holding and Inter IKEA Systems.

Inter IKEA Systems collected €631 million of franchise fees in 2004, but reported pre-tax profits of only €225 million in 2004. One of the major pre-tax expenses that Inter IKEA systems reported was €590 million of “other operating charges.” IKEA has refused to explain these charges, but Inter IKEA Systems appears to make large payments to I.I. Holding, another Luxembourg-registered group that, according to The Economist, “is almost certain to be controlled by the Kamprad family”. I.I. Holding made a profit of €328 million in 2004.

In 2004, the Inter IKEA group of companies and I.I. Holding reported combined profits of €553m and paid €19m in taxes, or approximately 3.5 percent.

The Berne Declaration, a non-profit organization in Switzerland that promotes corporate responsibility, has formally criticized IKEA for its tax avoidance strategies. In 2007, the Berne Declaration nominated IKEA for one of its Public Eye “awards,” which highlight corporate irresponsibility and are announced during the World Economic Forum in Davos, Switzerland.

Control by Kamprad

Along with helping IKEA make non-taxable profit, IKEA's complicated corporate structure allows Kamprad to maintain tight control over the operations of Ingka Holding, and thus the operation of most IKEA stores. The Ingka Foundation’s five-person executive committee is chaired by Kamprad. It appoints the board of Ingka Holding, approves any changes to Ingka Holding’s bylaws, and has the right to preempt new share issues. If a member of the executive committee quits or dies, the other four members appoint his or her replacement.

In Kamprad's absence the foundation's bylaws include specific provisions requiring it to continue operating the Ingka Holding group and specifying that shares can be sold only to another foundation with the same objectives as the Ingka Foundation.

Despite its enormous wealth, the Ingka Foundation does very little charitable giving. Detailed information about its grantmaking is unavailable, as foundations in the Netherlands are not required to publish their records. But IKEA has reported that in 2004-2005, the Ingka Foundation's donations were concentrated on the Lund Institute of Technology in Sweden, and the Lund Institute reported the receipt of $1.7 million grants from the foundation during both of those years. By way of comparison, the Gates Foundation made gifts of more than $1.5 billion in 2005..

Notwithstanding the Ingka Foundation's lack of concerted philanthropic activity, IKEA is involved in several international charitable causes, particularly in partnership with UNICEF. These include:

IKEA contributed 1 euro to UNICEF from each soft toy sold during the 2006 holiday season, raising a total of €1.75 million.

In the wake of the 2005 Boxing Day Tsunami, IKEA Australia agreed to match dollar for dollar co-workers donations and donated all sales of the IKEA Blue Bag to the cause.

After the Pakistan earthquake of 2006, IKEA gave 500,000 blankets to the relief effort in the region

Links with Education
In 2008 Ikea was a supporter of the Design WalesFfres Awards, providing a creative brief for undergraduate design competition.

Environmental performance

In 1990, IKEA invited Karl-Henrik Robèrt, founder of The Natural Step, to address its board of directors. Robert's system conditions for sustainability provided a strategic approach to improving the company's environmental performance. This led to the development of an Environmental Action Plan, which was adopted in 1992. The plan focused on structural change, allowing IKEA to "maximize the impact of resources invested and reduce the energy necessary to address isolated issues." The environmental measures taken, include the following:

Replacing polyvinylchloride (PVC) in wallpapers, home textiles, shower curtains, lampshades, and furniture—PVC has been eliminated from packaging and is being phased out in electric cables;

minimizing the use of formaldehyde in its products, including textiles;

producing a model of chair (OGLA) made from 100% pre-consumer plastic waste;

introducing a series of air-inflatable furniture products into the product line. Such products reduce the use of raw materials for framing and stuffing and reduce transportation weight and volume to about 15% of that of conventional furniture;

using only recyclable materials for flat packaging and "pure" (non-mixed) materials for packaging to assist in recycling.

introducing rental bicycles with trailers for customers in Denmark.

More recently, IKEA has begun charging for each plastic bag, while offering a paper bag or no bag for no extra cost. The IKEA restaurants also only offer reusable plates, knives, forks, spoons, etc. Toilets in some IKEA restrooms have been outfitted with dual-function flushers. Most stores only offer paper plates and plastic knives, forks, and spoons.

Community impact

IKEA's goals of sustainability and environmental design in their merchandise have sometimes been at odds with the challenges that the impact a new IKEA store can have on a community.

In Saudi Arabia, three people were crushed to death in September 2004 when IKEA offered a limited number of free $150 vouchers.

IKEA has demolished historic buildings in at least one case for a parking area. (At the College Park, Maryland, USA, store there is an interactive digital display which tells the history of a tavern which used to exist where the store is currently located.)

Criticisms

“Stop being so English”: In which a “Swedish psychologist” claims the British are uptight due to their taste in “English” furniture (complaints were dismissed).

An advertisement where a management consultant suggests how much more furniture a company could buy if it fired an office worker (complaints were dismissed but IKEA voluntarily withdrew the advert).

A campaign under the slogan, "Just pack up, ship out, find a place of your own. And for all your new things, you know where to come. Make a fresh start," got complaints that it was trivializing marriage breakups (complaints were dismissed).

IKEA founder Ingvar Kamprad was, as a teen, directly involved in the pro-Nazi New Swedish Movement (Nysvenska Rörelsen) until at least 1945, causing tensions when IKEA began opening stores in Israel. Kamprad devotes two chapters to his time in Nysvenska Rörelsen in his book, Leading By Design: The IKEA Story and, in a 1994 letter to IKEA employees, called his affiliation with the organization the "greatest mistake of his life.

Former Norwegian prime minister Kjell Magne Bondevik has criticized IKEA for not depicting women assembling furniture in its instruction booklets, despite the fact that many sets of instructions do, in fact, show women - though not often.

In 2004 there was controversy about an Irish law restricting the maximum size of a retail outlet to 6,000 m2. IKEA's plan to build a much larger store in Dublin caused the law to be put up for debate. The law was changed to remove the size limit for retail outlets selling durable goods in designated areas. The Minister for the Environment was criticized for allegedly changing the law to suit one company and other agencies protested the law change as damaging to small businesses while the government defended their decision stating that the move was a positive one for Irish consumers. IKEA have continued with their development of the Dublin store without comment.

June 2007: the Social Democratic and Labour Party complained about an artist's rendering of IKEA Belfast that included both the Union Flag and the Red Hand of Ulster flag as two of the three flags in front of the store. After being labelled "an upmarket Orange hall" by the party, IKEA assured customers and coworkers that only the Swedish flag would be seen outside the actual store.

June 2007: some prospective customers took offense at an email newsletter with questionable advertising copy. To wit, the BRUNKRISSLA bedding notes said, "Brightens up your grad's dorm. Unlike a creepy gothic roommate, who can be a bad influence." Members of the goth subculture took offense at the stereotype.

A researcher from the University of Copenhagen discovered that for years, IKEA has named their cheap rugs after Danish places, while the more expensive and luxurious furniture was named after Swedish places. The researcher, Klaus Kjøller, who is well-known for tongue-in-cheek statements, accused IKEA of imperialism.

People in Canada became upset with IKEA when a TV station discovered that IKEA charged as much as twice the price in their Canadian stores for the same items sold in their American stores, this despite the Canadian dollar reaching parity with the U.S. dollar.

Advertising

IKEA ran a commercial widely thought to be the first commercial featuring a gay couple. It aired only once, in 1994. IKEA has run other commercials targeting the gay community as well as a commercial featuring a transgender woman.

Awards

IKEA was named one of the 100 Best Companies for Working Mothers in 2004 and 2005 by Working Mothers magazine. It ranked 96 in Fortune's 100 Best Companies to Work For in 2006 and, in 2007, was recognized as one of Canada's Top 100 Employers published in Maclean's magazine.